So you dragged your organization kicking and screaming through a few transitions to a shared services and/or outsourced business model, and now it’s time to spread the wealth to the rest of the organization. You and your team might think that the next logical step is to focus inward, building up more process skills, identify opportunities to move up or across the value chain, deepen governance and reporting, or search for that Holy Grail called innovation. However, these vital efforts are merely table stakes in the provisioning of shared services; ‘build it better and they will come’ is never a viable approach to scaling shared services in most organizations.
Particularly if the move to a shared services or outsourced model is not mandatory, it’s imperative for the shared services or sourcing organization to deliver growth. Without growth, shared services and outsourcing are not much more than a corporate experiment at best, or a hobby, as opposed to a real, sustainable change in the business model. Global services organizations—whether comprised of some form of shared services, or outsourcing –or both—must be held accountable to scale.
The imperative to Scale
Scaling is difficult for any business. And global services, as a business, is no different; it can be viewed as” a company within a company” with an imperative to grow. Some of the luckier organizations have a man or woman at the top demanding that every function, geography or business unit participate, alleviating the need to market, but most relegate the responsibility to drive scale to their services organizations.
Our shared services and sourcing organizations are simply not designed to aggressively scale. Most have been established with a “build it and they will come” approach, based on the belief that the business lines and enabling functions, with a minimal or modest level of communication, will “get” the value proposition, and behave accordingly. Therefore, organizations are designed as “order takers” primarily focusing on developing the right solution, ensuring operational excellence and implementing the right governance structure to optimize relationships, put in place the right controls, manage risk and make sure escalation and response models work.
Without scale any services initiative has limited impact. Thinking about most organizations, and what percentage of functions—enabling or business operations– are delivered through a global services initiative, the numbers in aggregate are still relatively small. With the Global 5000 employing on average of almost 30,000 employees, and European based companies on the list almost 50,000, 100 or 200 FTEs in a global delivery model is not much more than an organizational experiment. If shared services and outsourcing is being used to truly change the business model, making it more global, or efficient, or nimble, scale is mandatory for a range of reasons:
Critical to achieve maximum benefit for stakeholders Achieving scale is more than a reflection of an organization’s appetite to truly evolve the business model; it’s also critical to deliver maximum benefit to stakeholders. Think about a smallish shared services operation, or a 50 FTE equivalent outsourcing relationship. Then remind yourself about the extent of investment it took to staff the sourcing and transition functions, fund consultants, develop the IP necessary to hone tools such as RFPs and evaluation criteria, develop business cases and migration plans, and redesign the organization. Think about the cost of implementing the model—both in additional resources, and the time spent by the in-house team. Consider the time spend in finding and training the right team to operate and govern. It takes a substantial effort to get in gear to implement and run a shared services or outsourcing operation.
Gets executive attention Let’s be honest—small corporate initiatives get little executive attention. Why should a CXO use his organizational capital to support a shared services or outsourcing initiative that stalls at a fraction of his headcount? Many in the C-suite will look for leadership from the shared services or sourcing function as a validation of his or her mandate before investing time and effort persuading leadership to get onto the bandwagon. And scale talks.
Creates momentumDon’t underestimate the persuasive power of momentum. How many of us want to visibly get on a corporate bandwagon that appears to be moving very slowly? The herd instinct is true in shared services and outsourcing scale; internal clients look around the organization; if they see few of their peers getting onboard, they think that they can continue to sit it out the game.
Exploits synergies Without scale, there are limited synergies to offer clients as a vital part of the value proposition. Shared services and outsourcing, in their simplest forms, are about creating synergies by bolting two or more processes or functions together to produce a result not independently obtainable. For example, if a shared services operation focuses on changing the delivery just one component of finance and accounting, say accounts payable, the opportunity to derive more value from bolting on procurement is lost. Or if recruitment is not linked with talent management, value is lost.
Delivers return Lastly, scale…and only scale…delivers ROI. The total cost of ownership of shared services and outsourcing is not always fully tracked. Experience suggests that, in the early- to-mid stages of shared services formation or outsourcing implementation, the cost of migration, management and governance can be as much as one fourth of the cost of a head in a sourced model, even more if the actual labor is provided in a low cost location.
Organizational dynamics get in the way
But the challenge is that our shared services and sourcing organizations are not designed to aggressively scale. Most have been established with a “build it and they will come” order taker approach, based on the belief that the business lines and enabling functions, with a minimal or modest level of communication, will “get” the value proposition, and behave accordingly. Therefore, they are designed as “order takers” primarily focusing on developing the right solution, ensuring operational excellence and implementing the right governance structure to optimize relationships, put in place the right controls, manage risk and make sure escalation and response models work.
What’s derailing scale from an organizational perspective? There are several causes that confront almost every shared services or sourcing team.
Goes against the grain If the shared services unit’s charge is consolidating, harmonizing and standardizing enabling functions such as finance and accounting or HR, it is going against the grain of the organization. Especially if it has historically embedded these functions within a business unit or geographically led organization, it’s an unwelcome and resisted structural change. Achieving shared services and outsourcing scale in a company that is not led from the center means that the shared services or sourcing organization is fighting on a range of fronts, and has to persuade each corporate fiefdom to participate—when they perceive shared services as a taking and loss of control.
Seen as “empire building” Shared services leadership, in particular, is seen as ‘empire building’ at the expense of business line or geographic needs and customer service. As a result, shared services is often seen as a threat and a duplication of what’s already in place, often less effective, not improved and sometimes costing more as a result of standardization—all code for lack of control. If a function is transferred to central management, it often means that the business line or geo can no longer manipulate the budget or service standards to meet its own needs.
Stalls naturally Scaling shared services is like trying to lose weight. After a period of time, often two to three years, the shared services organization, like other corporate initiatives, hits a natural plateau. There are several contributors; fatigue on the part of the shared services or sourcing team, or the “we’ve got it right” or the “enough is enough” syndrome which is voiced or in the subconscious of the internal customer. There’s often a sense that “we’ve contributed our fair share” and that any further migration of the function’s processes cuts perilously close to the core operations.
What’s the answer?
The key to scale…is marketing.
Any corporate change has to be marketed, and shared services and outsourcing is no exception. One of the reasons many corporate transformation programs fail is because the sponsors forgot that any change needs to be actively, aggressively and consistently sold.
Marketing shared services is not about slick and pushy salesmen, or fancy brochures, or videos with a great soundtrack. Rather, it is a formal, integrated process which is deployed across the shared services organization to shape consistent, effective engagement with both potential and existing customers, and respond to how they buy. It is the underlying structure for business development, sales techniques, and communication, and is the process through which strong customer relationships and enterprise value is created.
Shared services organizations are in effect internal providers with the right to grow an operations footprint within a captive market. Just as outsourcing providers use marketing to fuel growth, investing in creating messages that are memorable, and value propositions that differentiate themselves, internal organizations must also market to scale, creating a brand that resonates well within the company, targeting customers with the greatest propensity to buy, and focusing investment on existing organizations who can contribute growth.
Why do shared services organizations either ignore or disdain marketing? Firstly, scale is rarely a metric that shared services leadership are held to; few CXOs focus on scale in favor of being cost-neutral, or keeping noise down. Second, organizations are positioned as facilitators, rather than drivers of global delivery model growth. Third, prevailing best practice does not promote bringing in staff with capabilities other than strategy, solutioning, transition, operations and governance. Lastly, since most of the team is very left brained, management generally believe the benefits of globalizing services delivery speak for themselves, looking with disdain on marketing as just so much fluff, not substance.
But marketing shared services and outsourcing is actually easier than one might think. The lingua franca of the services industry is process—we manage processes, we streamline processes, we improve processes, we measure processes. Marketing is not an occasional communiqué, or a pretty brochure, it is actually a process that, if designed properly, is repeatable and measurable, just like any other. It is predictable—for example, engage with a target successfully seven times, and there’s a platform to start a substantive discussion.
Marketing has a line of sight. Once growth metrics are established, it’s easy to track cause and effect. And with scale, the metrics are crystal clear; if more headcount or work content shifts to shared services or outsourcing delivery, scale is being achieved.
If the table stakes measurements—meeting SLAs, reducing cost, becoming more efficient and effective—are being met, the value proposition can be made obvious to target customers without much ambiguity. And because the organization has internal customers to reference, existing clients are available to support the marketing process.
Shared services organizations benefit from corporate intimacy, a critical driver that no external provider can claim. Understanding the nuances of the culture, knowing the corporate handshake, and where the proverbial skeletons are buried is an immense advantage in the marketing process.
And last, internal organizations have the advantage of proximity—not only regular interactions during the course of corporate life, but also at every juncture during the services lifecycle, enabling the team to continually look for opportunities to scale.
Scaling the heights of shared services and outsourcing is not easy, but it is the best measure of corporate commitment to change the business model. Given the amount of investment—both emotional and financial—required to set up shared services and sourcing units, subscale operations have little impact without growth. And left to chance, the attainment of scale is highly unlikely, especially in organizations without a mandate from the top of the house.
But marketing, a formal, integrated process which is deployed across the shared services organization to shape consistent, effective engagement with both potential and existing customers, and respond to how they buy, is the likely answer.